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Orchid Pharma Ltd.

BSE: 524372 | NSE: ORCHIDPHAR | Series: NA | ISIN: INE191A01019 | SECTOR: Pharmaceuticals

BSE Live

Jul 24, 16:00
5.25 0.00 (0.00%)
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46,256
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    5.25

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    5.25

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    5.25 (76899)

Orchid Pharma is not traded on BSE in the last 30 days

NSE Live

Jul 24, 15:40
5.45 0.00 (0.00%)
Volume
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21,970
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    5.45

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    5.60

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  • Offer Price (Qty.)

    5.45 (7230)

Orchid Pharma is not traded on NSE in the last 30 days

Annual Report

For Year :
2009 2008 2007

Chairman's Speech

The fiscal 2008-09 was challenging for us. In an environment of global financial meltdown, we encountered additional constraints with key product approvals delayed, capex programmes increasing debt and interest as well as an unprecedented currency fluctuation denting profitability. Consequently, revenue growth was muted and margins declined. Despite the odds we completed our asset build-up and the current year will mark the beginning of a new growth wave centred around product diversification leading to higher returns. Strategic direction I must briefly recap some developments. In our initial growth phase, we achieved a dominant status as a global cephalosporin antibiotic API player. The more recent phase saw us diversify our asset base to cover not only APIs but also finished dosage forms (FDFs) and extend beyond cephalosporins into penicillins and carbapenems in the antibiotics range and several non-penicillin, non-cephalosporin products in the lifestyle product range. We established a strong presence in the US cephalosporin generics market and are poised to replicate our success in other antibiotic and non-antibiotic areas. Over five years, we invested significant funds to strengthen capabilities, create facilities and expand capacities. A large part of these investments was funded by debt so that the Company could capitalise on market opportunities with speed. The reliance on debt has no doubt translated into a temporarily higher interest liability but will be mitigated once our product diversification strategy starts paying off. Our investments are focused on global scale capabilities in four verticals cephalosporins orals and injectables, penicillin injectables, carbapenems and non-antibiotics, several of them as Para IV FTF applications. Currently, 85-90% of the Companys turnover is still derived from cephalosporins, even as we committed investments in other verticals. This created a significant stress on our operations last fiscal. With the recent and envisaged product approvals and the resulting product-market diversification, the revenue contribution is anticipated to change. Cephalosporins: We enjoy a dominant status in the US cephalosporin generics market, in the form of marketing partnerships with Apotex and a leading distribution house. We are poised to extend our coverage to the EU with two major pan-European alliances with Actavis and Hospira. Plans are also afoot to launch novel dosage forms in this segment, to ensure continued niche positioning. Penicillins: Revenues from this segment commenced with the launch of Piperacillin-Tazobactam injections in Australia, Europe and Canada in 2008-09. We anticipate a launch in the US in 2009-10 based on likely regulatory approval. In each of the markets, the Company hopes to carve out a significant share. Carbapenems: Carbapenems is another futuristic segment where your Company has a unique development and manufacturing position globally, on an end-to-end basis in APIs and dosage forms. The revenue from this segment are anticipated to accrue from this fiscal and increase subsequently. Other product segments: Orchid has developed a significant product pipeline covering other lifestyle categories such as central nervous system, cardiovascular, anti-emetic, gastro-intestinal and pain management drugs. A few approvals have already been received and there will be significant product launches in this segment in this fiscal and beyond. Although each segment will continue to grow, the relative contribution from cephalosporins will progressively decline while that from penicillin injections, carbapenems and oral non-cephalosporins will increase. As our investments begin yielding significant returns, our financial profile will get deleveraged and profitability strengthened. Key growth engines Product pipeline: Orchids robust pipeline is expected to catalyse growth in the following ways: We expect to launch around a dozen products in the cephalosporin and other categories in the US and the EU in 2009-10 with an estimated market size of US$2.6 billion (pre-patent expiry). The already launched high value products namely Cefdinir and Cefepime among others, in the US will continue to generate sizeable revenue from 2009-10. The pipeline of carbapenems represents a major first mover opportunity and could improve with newer carbapenems getting added. As we extend our marketing alliances to cover additional products and additional markets, we will enhance product-market scope. The recently completed second antibiotic injectables line for certain niche dosage forms will help us access an attractive market segment. Our launch of Piperacillin-Tazobactam injections in Australia, Europe and Canada in 2008-09 should significantly grow our business and profitability in the coming years API alliances: Apart from ensuring continued growth in API business, we also entered into agreements with select corporations to supply select antibiotic bulk actives on a long-term basis. These APIs will be sourced by them after approvals by the regulatory authorities for site variation. This arrangement will enhance our asset utilisation and improve our revenue as well as profitability. Paragraph IV first-to-file products: Within a short span of entering the non- antibiotic product range, Orchid filed 7 ANDAs with US FDA as Paragraph IV, first-to-file (FTF) filings out of a total of 21 non-antibiotic ANDA filings in the US. We are also working on additional Para IV FTF applications for products with a large estimated market. These Para IV FTF products should drive a greater share of our business. Japan - new focus We have also embarked on a new initiative to diversify our presence in the exacting Japanese market. Japan is the second largest pharmaceutical market and the second highest healthcare spender. The pharmaceutical sales in the Japanese market increased by 3% from US$66.6 bn in 2007 to US$68.6 bn in 2008. The Japanese government is committed to increase the share of generics from the current low of 4% to as high as 30% in the years to come. Orchid, with its balanced coverage of antibiotic and lifestyle products, is well suited to meet the requirements of the Japanese society, which is marked by an ageing population and spiralling healthcare costs. During fiscal 2009, we established Orchid Pharma Japan to support our foray into Japan. We have so far filed three DMFs for Japan with more in the pipeline in 2009-10 and beyond. While continuing discussions on potential API sales, we are discussing an initial basket of generic dosage form products with potential partners. Innovation new chemical entities The Company reinforced its drug discovery focus with an acceleration of discovery and development activities in the selected therapeutic areas of diabetes, pain management, oncology and anti-infective products. A rich compound library was developed in these areas with several interesting discovery hits and pre-clinical leads. Two new chemical entities in the inflammatory and oncology areas are undergoing regulatory toxicology studies and could be positioned for Phase I studies upon successful conclusion. We are also undertaking the development and manufacture of an anti- coagulant drug candidate initially discovered and developed through Phase I by Merck & Co., Inc, US. We invested in Diakron Pharmaceuticals Inc, which has an exclusive license agreement with Merck for the compound. Our investment in Diakron will eventually result in majority control. The compound is a novel investigational oral anticoagulant drug with considerable potential. We also entered into a major collaboration and licencing agreement with Merck & Co., Inc for the discovery of novel anti-infective drugs. Under the agreement, Orchid will identify and develop novel anti-bacterial and anti- fungal compounds as clinically validated drug candidates. We will undertake discovery and candidate development through Phase II a human clinical trials. Merck will consider late stage clinical development and subsequent commercialisation based on regulatory approvals. The alliance with the global pharma major for research-based novel discovery not only provides attractive milestone and royalty payments but also enhances Orchids brand as an innovation-led organisation. The multi-pronged strategy of proprietary drug discovery, collaborative drug discovery and fee-for-service projects will ensure that the risk-reward equations inherent in the complex drug discovery processes are balanced for optimal value. CRAMS Apart from generics and proprietary discovery initiatives, we are also introducing our unique abilities of undertaking custom research and manufacturing services to select innovator companies. Orchid, with its world- class multi-therapeutic, R&D and manufacturing infrastructure and competencies covering the total spectrum of pharmaceutical value chain, is attractively positioned to undertake wide ranging development and manufacturing projects covering discovery, optimisation, pre-clinical, clinical and commercial supplies. Our strategy will be to work with fewer partners but on a broader and deeper spectrum to provide a total complement of products and services for such preferred partners. We are now at the cusp of the next growth phase, which will result in substantial business development and robust year-on-year growth across all our high-value verticals. I wish to take this opportunity to thank the shareholders and all our other stakeholders for their continued support to our growth plans. Regards, K Raghavendra Rao